Introduction by George Dorgan
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Summary:
Money markets and the Swiss franc have diverged despite a presumed increase in event risk from the U.S. Presidential election.
Moreover, shorts against the Swiss franc have risen.
This surprising divergence opens up a presumed opportunity use the franc as a hedge against a surprise outcome from the election.
This time Duru agrees with the strategy even as he suspects that, once again, any subsequent incremental strength in the Swiss franc will be short-lived.
Analysts are once again making a case for using the Swiss franc (NYSEARCA:FXF) as a hedge against a big event. Last time, the franc was supposed to be a hedge against Brexit. I argued at the time that the currency was a poor choice. That argument happened to prove correct although my extrapolation to a bottoming for the British pound (NYSEARCA:FXB) was premature (more on that bottoming process in a coming piece). This time around, analysts are arguing that the franc would serve as a good hedge against the U.S. Presidential election… and THIS time, I agree.
Bloomberg lays out the argument in “Swiss Franc Offers Best of Both Worlds for Hedging U.S.